Resident Budget Guide: Making $65K Work With $250K in Debt

You are a doctor but your paychecks are hardly laughable. To be frank: you signed a matching letter and when that first paycheck came you quickly realized the numbers: owing $250, 000 but only earning $4, 100 a month. That's absurd but you can make this work indeed. You will be far ahead of colleagues who did not plan at all if you manage this next three to five years well.

What $65K actually looks like after taxes

Check your actual paycheck stubs before planning anything. Budgets should not use gross numbers. A typical salary of about $65,000 nets roughly $4000 to $4300 per month after federal income tax and FICA and state taxes. Monthly take home pay in California or New York is closer to $3900. First residents in IM programs typically get gross pay of $59,000 to $63,000 and take home about $3800 per month at first year. By PGY 3 you receive closer to $4200 to $4400 monthly. Know this exact amount as this is most important.

Your loan payment during residency: the good news

Usually it is not clear until loan bills arrive. Monthly payments for federal loans are based on income, not amount you owe; they are part of the SAVE plan and will be about $450 a month for someone earning $65, 000; a standard 10 year payment for a balance of $250, 000 is about $2950; the plan cuts that by roughly 85 percent. Thus residency becomes financially feasible. After 5 years you have paid half of qualifying payments by your first attending salary anyway; this is really very good financially as a deal for medicine if your employer is 501 (c)(3) or VA and you can use this if appropriate.

A realistic monthly budget on $4,100 take-home

This budget is realistic for someone without kids living in a mid level cost city and with SAVAS loans. Monthly loan payments average $450. Rent for a single room or a shared two bedroom apartment costs roughly $1200. Buying groceries frugally averages $350. Transportation by car or public transit costs $425 and utilities and internet costs $175. Health insurance after subsidy is about $100. Phone costs $65 and other miscellaneous expenses add another $125. You save $250 for emergencies. Total outgoings are about $3140 and with this budget living feels fine until you consider places like New York or San Francisco where rent starts at $2100; this is very harsh and I won't disguise that.

The biggest budget lever: housing

Saving or destroying homes: no comparison. Living with someone in a two bedroom rather than living alone means about $600 monthly savings; over three years this adds up to $21, 600. Walking or biking to the hospital cuts out car costs, insurance and gas. Many choose residencies because they live close; that is smart economically. Of course one won't live like students forever; at most three or five years. Live frugally now and later this will be forgotten.

Transportation: car vs. no car

Monthly costs total $650 including car payment, $150 for insurance and $100 for gas and maintenance; three years will cost $23,400. If you use transit and do not need a car for work or training then you do not own one. Buy a car only if salary exceeds $280,000.

If you really need one buy a used car if you have savings; otherwise limit monthly payments to under $250 if financing. For someone who earns $65,000 financing a new car is one of the most common financial blunders and this happens monthly.

Should you make extra loan payments during residency?

No, that is categorically incorrect. Payments in excess for PSLF are in fact harmful. Pay extra now and that money will never be forgiven later. Pay only the minimum and get maximum forgiveness – that is math. If PSLF is not your plan, putting extra money into debt with such low salary is a mistake. Fixed federal rate means you need more flexibility. Things will go wrong and programs will change and you will face unplanned expenses because your salary has little room to handle these. Build an emergency fund of $8000 to $10000 first before making any extra payments and open a Roth IRA. Currently you are in the lowest tax bracket for sure. Contributions to Roth now are very valuable at this time and accelerating loan payoff begins when new salary hits your account.

Moonlighting: extra income during residency

Consider taking shifts if the program allows. Pay for ambulatory urgent care and ED is $150 to $250 per hour. Take one weekend day as an example: you get $2,000 to $4,000 pretax per month. That is significant to someone who earns base pay of $65,000.

Before you start check three things: first, what your program allows regarding moonlighting, some programs ban outright. Second, licensing requirements of your state, some require full licenses while others allow training licenses. Third, malpractice insurance because hospitals do not extend insurance coverage to outside work. Extra income should be put first into the emergency fund and then into retirement. Finally, pay off debts with higher interest rate before anything else above federal loans.

The PSLF tracker: start now

Don't delay in submitting paperwork for PSLF once you graduate. I see this mistake repeatedly. If your employer is a 501(c)(3) or VA hospital, submit paperwork within the first 60 days of starting residency. That way you confirm your employer qualifies before wasting time assuming they do. Many residents find this too late after years of thinking their hospital qualified. They find out on day 60 instead of during their third year. Use tracker for PSLF at https://www.medschooldebtcalculator.com/calculator to keep track of qualifying payments and see projected timeline based on your current situation and future plans.

What attending salary changes

Everything means everything; financial decisions that once were agonizing at $65, 000 become very minor when you reach such high income levels. Going from internal medicine residency to $240, 000 and cardiologist residency to $430, 000 represents a completely new world. Don't try to maximize residency finances thinking you are already at attending level; now your job is much easier: survive and build up an emergency fund. Use Public Service Loan Forgiveness payments if your employer qualifies and avoid irreversible decisions about loans – that's it: wealth building will come later but quickly as salaries grow.

Model your full training-to-attending journey

Use MedDebt Calculator at https://www.medschooldebtcalculator.com/calculator to trace your whole path. Enter current balance and length of residency along with salary expected. Enter specialty and expected employer type. It tracks balance through residency and into years as an attending and compares PSLF and IDR along with aggressive payoff plans not just averages. Data sources include AAMC Graduation Questionnaire, documentation from Department of Education for Savings for Value Education (SAVE) Plan and Bureau of Labor Statistics wages and report from MGMA on physician compensation and production.